The decision about whether a psychologist’s services attract GST involves several considerations that are outlined below in a series of questions and answers.

  • Are you registered for the GST?

    To be registered for the GST, you must complete an application for an Australian Business Number (ABN) and indicate at the appropriate question that you wish to register for the GST.

  • Is having an ABN the same as registering for the GST?

    No. It is possible to have an ABN without being registered for the GST. It is advisable to obtain an ABN because if you do work for a government organisation and cannot supply an ABN, then the government organisation is legally obliged to withhold 48.5% of your payment.

  • Can I choose not to register for the GST?

    You do not have to register for the GST as long as your annual income generated from private practice remains lower than $75,000. If it exceeds $75,000, then you are legally obliged to register for the GST.

  • When do I charge GST? What is ‘appropriate treatment’?

    If the services of a practitioner have any chance of being GST-free, they must be delivered by a recognised health professional. Registered psychologists are assessed as being a recognised health professional. In addition, the psychological service must be 'generally accepted' by the profession as being necessary for the 'appropriate treatment' of a client.

    Appropriate treatment is not defined by the legislation, but it is considered that appropriate treatment will be established where the recognised professional assesses the recipient’s state of health and determines a process to pursue, in an attempt to preserve, restore or improve the physical or psychological wellbeing of that recipient insofar as that recognised professional’s particular area of training allows and will include subsequent supplies for the determined process.

  • What happens if I am providing private psychological services but am only probationary or conditionally registered?

    A ‘trainee’ psychologist would satisfy the definition of ‘recognised professional’ in their own right, provided that they have permission or approval or are registered by the relevant federal body.

  • What psychological services are not GST-free? (that I must charge GST for)

    Some services are not considered to fit the criteria of “appropriate treatment” of a client, therefore you must charge GST. These include:

    • Career counselling is not considered appropriate treatment, and is therefore taxable;
    • Training work; and
    • Supervision, if it is conducted for purposes of professional development.

     

  • What about the status of psychological reports? Is the supply of the report to the individual who has been assessed GST-free?

    Where an individual is assessed and a report is provided to them, the supply:

    • will be GST-free if it is for the ‘appropriate treatment’ of the individual
    • will not be GST-free if it is provided to the individual to be used by a third party for a purpose other than the appropriate treatment of the recipient.

     

  • Is the supply of a psychological report to another treating practitioner GST-free?

    Where an individual sees a psychologist and a report is prepared for another medical practitioner, the report will be GST-free if it is prepared for the ‘appropriate treatment’ of the individual.

  • Does a psychologist charge GST for third party payers? *new*

    UPDATE: Some changes were made to GST July 1 2012 relating to third parties as the recipient of supply.

    From July 1 2012, if the underlying supply of health service to an individual is GST-free (that is, is for the “appropriate treatment” of an individual) then the supply of service to the recipient of supply - the third party - will also be GST-free.

    This applies where the recipient of supply is:

    • an insurer settling a claim under an insurance policy (with GST-free private health insurance and taxable insurance policies)
    • an operator of a statutory compensation scheme (e.g. Workers Compensation, Motor Accident Authorities)
    • an operator of a compulsory third party scheme
    • an Australian government agency (e.g. Department of Veterans’ Affairs, Family Court)

    If you need clarification of who the recipient of supply is in an individual situation, you can seek direct advice from the ATO – details here

     

    What is an Australian government agency?

    "Australian government agency"according to section 995-1 of the Income Tax Assessment Act 1997 Australian government agency means:

    • the Commonwealth, a State or a Territory;
    • or an authority of the Commonwealth or of a State or a Territory

    (This means a body which is given the power to direct or control affairs of others on behalf of the State e.g. a local council)

    If you need clarification of who the recipient of supply is in an individual situation, you can seek direct advice from the ATO – details here

     

  • What is the GST status of the supply of EAPs to employer organisations?

    This depends on who the recipient of supply is. If the employer organisation is an insurer, scheme operator or an Australian government agency (as defined above in question 9), the supply will be GST-free to the extent that the underlying supply to the individual is GST-free.

    Should the organisation not fit into any of the categories of third party and therefore a private sector, non-government organisation etc., then the service will be subject to GST and will include any retainers or upfront charges as well as the fees in relation to each individual service performed.

  • Is GST payable on contracts an EAP provider has with outside psychologists it uses to provide services to its clients?

    Where an EAP provider contracts a psychologist to make a supply to a client under a contract that the EAP has entered into, it is considered that the recipient of supply is to the EAP, not the individual. As such, the third party conditions apply. That is, if the recipient of supply is an insurer, scheme operator or an Australian government agency, the supply will be GST-free to the extent that the underlying supply to the individual is GST-free. Should the organisation not be one of these third parties then the service will be subject to GST and will include any retainers or upfront charges as well as the fees in relation to each individual service performed.

  • Is GST payable on contracts an EAP provider has with other EAP providers to provide services to their clients?

    Where other EAP providers contract an EAP provider for a right to have the services provided to their clients, the other organisations will be taken to be the recipient of the supply of the EAPs. Again, the third party conditions apply. If the recipient of supply is an insurer, scheme operator or an Australian government agency, the supply will be GST-free to the extent that the underlying supply to the individual is GST-free. Should the organisation not be one of these third parties then the service will be subject to GST and will include any retainers or upfront charges as well as the fees in relation to each individual service performed. Where registered for GST the other organisations will be entitled to an input tax credit in respect of the GST paid.

  • Is GST payable for psychologists who provide ATAPS services to Medicare Locals?

    In this instance the Medicare Locals are the “recipient of supply”. As Medicare Locals are independent organisations and not an insurer, scheme operator or an Australian government agency (see GST Update below), services provided to Medicare Locals as a third party will be subject to GST. This means that psychologists providing ATAPS services to Medicare Locals must charge GST, on the proviso that the psychologist is registered for GST.  

GST update

UPDATE: Some changes were made to GST July 1 2012 relating to third parties as the recipient of supply.

From July 1 2012, if the underlying supply of health service to an individual is GST-free (that is, is for the “appropriate treatment” of an individual) then the supply of service to the recipient of supply - the third party - will also be GST-free.

This applies where the recipient of supply is:

  • an insurer settling a claim under an insurance policy (with GST-free private health insurance and taxable insurance policies)
  • an operator of a statutory compensation scheme (e.g. Workers Compensation, Motor Accident Authorities)
  • an operator of a compulsory third party scheme
  • an Australian government agency (e.g. Department of Veterans’ Affairs, Family Court)

If you need clarification of who the recipient of supply is in an individual situation, you can seek direct advice from the ATO – see below for contact details.

 

GST resources for health services

 

Professional and specific advice

For professional and specific advice on GST and health services contact:

  • the ATO - If you are unclear about a specific situation, you can request a binding Private Ruling

    Email: GSTmail@ato.gov.au
    Phone: 13 24 78
    Mail: Australian Taxation Office
    PO Box 3524
    ALBURY NSW  2640
  • a tax accountant 
  • APS National Office